School Funding Bill Gets a Nod from the House

This tax bill nearly failed in the house, revealing a clear lack of consensus. An analysis by the Legislature concluded "only Texas families who earn more than $100,593 annually would get an overall tax break under the measure. For those making less, higher state taxes would outweigh the property tax break." Unfortunately, an attempt to extend the franchis tax which currently exempts an inordinate number of businesses failed. Also, just as during the regular session, Speaker Craddick named a negotiators on a school overhaul bill related to the tax measure who are not diverse. This despite the diverse makeup of our public school system. This is never a good move. Not that "token" representation is desirable, but rather that substantive representation of members in those districts like HISD with so few Anglo children in them should be at the table. The Senate and House will be battling it out. In the end, depending on the Supreme Court, neither approach may pass constitutional muster. We'll see. The court decision is expected to take a few months. -Angela

School Funding Bill Gets a Nod from the House
7/07/2005 12:00 AM CDT
Peggy Fikac
Chief, Express-News Austin Bureau

AUSTIN — With no votes to spare, the House gave preliminary approval 73-72 to a measure Wednesday to lower local school property taxes with dramatic sales and cigarette tax increases plus a tweak of the state business levy.

The bill initially failed 74-73, despite a public vote of "aye" by GOP House Speaker Tom Craddick and a continuing push by GOP Gov. Rick Perry that included a Wednesday morning meeting with House Republicans.

It passed only after a roll call showed two Democrats initially shown as voting against the bill on the House's electronic tally board were found to be absent: Reps. Craig Eiland of Galveston and Trey Martinez Fischer of San Antonio.

Both absences later were announced as excused due to illness.

Democratic Rep. Dawnna Dukes of Austin also was absent but wasn't shown as voting.

"I regret that we couldn't all show up to be able to defeat this," said Rep. Mike Villarreal, D-San Antonio.

Thirteen of the 87 Republicans in the House voted against the bill, including Rep. Joe Straus of San Antonio.

If approved in another House vote, which could come today, the measure will go to the Senate for consideration.

A defeat of the bill at this point in the 30-day special session, which is more than half-over, would mean, "School finance is over," Villarreal said.

Rep. Robert Puente, D-San Antonio, who voted against the bill, said the divided vote sends a poor message to Texans about how policy is developed.

"If we're going to change our taxing structure, you would hope it would be with a much more unified voice," Puente said.

The edge-of-the-seat final vote came after backers of the bill spent the day turning aside major changes to the proposal.

"You can tell the property owners in your district that you responded to their cry for help," Rep. Jim Keffer, R-Eastland, said of House Bill 3, which he carried as head of the tax-writing Ways and Means Committee, although he'd wanted a change in its business tax provision.

Opponents said the measure would shift more of the tax burden to middle and lower-income Texans to provide relief to wealthier property owners.

A Legislative Budget Board analysis concluded only Texas families who earn more than $100,593 annually would get an overall tax break under the measure. For those making less, higher state taxes would outweigh the property tax break,

Supporters countered that a comptroller's analysis said it would increase investment, personal income and employment.

The bill would raise more than $7 billion in state taxes over the next two years, dedicating the revenue to reducing the maximum local school property tax rate for maintenance and operations from $1.50 per $100 valuation to $1.23 this year and then to $1.12. A two-thirds vote would be required for the relief to take effect right away.

The bill's backers fought back major amendments including one offered by Democrats to deliver a big part of the property tax relief in the form of a larger homestead exemption instead of the lowest possible rate. That would have shifted more tax relief to homeowners from businesses.

Rep. Warren Chisum, R-Pampa, made an unsuccessful effort to more thoroughly revamp the business tax by reaching past corporations to hundreds of thousands of other entities that avoid the current franchise tax.

The House turned down his proposal to reach labor-intensive businesses by adding the option of a payroll tax along with the current franchise tax.

House passage of the measure would be an important step for Perry, who championed key elements of it. Along with policy considerations, Perry faces a GOP primary challenge from state Comptroller Carole Keeton Strayhorn. School finance is sure to figure prominently in the race.

Perry ran radio ads pushing HB 3, and he met with the House Republican Caucus the body convened Wednesday. About 50 lawmakers attended, Perry spokeswoman Kathy Walt said. The House, with 149 current members, includes 87 Republicans.

"The governor talked with them about House Bill 3, the importance of closing the loopholes in the franchise tax, and the opportunity before legislators to provide real and historic property tax relief of more than $7 billion for the people of Texas," Walt said in an e-mail.

Perry called lawmakers into special session after the House and Senate were unable to agree on a school plan in the regular session. The House had wanted to lean more heavily on sales taxes to relieve local school property taxes, while the Senate wanted to spread more of the burden to the business tax.

Because lawmakers couldn't reach agreement on a broad business tax revamp, Perry backed the plan that's included in the bill to simply close escape hatches in the current tax that allow many corporations to avoid the franchise tax by the way they're organized.

The tax bill was considered on the same day that the Texas Supreme Court heard arguments on a district judge's ruling that the current school funding system is unconstitutional in part because of the way it relies on local property taxes.

Many school districts have reached a cap on how much money they can raise for operations. A number of lawmakers said they've heard from constituents strangled by high property taxes, while others say their constituents are less concerned about that issue than about providing proper funding for public education.

Besides the business tax change, the bill as taken up by the House would raise the sales tax rate by a penny on the dollar, to 7.25 percent. It would expand the sales tax to bottled water, computer programming that's not now taxed, and auto repair. It also would raise cigarette taxes by $1 a pack, to $1.41.

Chisum, in offering his proposed amendment to the measure, noted the traditional sentiment on tax bills overall.

"This is not the perfect tax bill," he said. "The perfect tax bill is the bill that taxes you and not me."

Also Wednesday, the House approved a bill to reinstate more than $33 billion in public education spending that Perry had vetoed in an effort to spur action on school finance reform. The measure next goes to the Senate.

In addition, Craddick named House negotiators on a school overhaul bill related to the tax measure.

As they were during the regular session, the negotiators are Anglo Republicans, a makeup that drew concern previously among those who said more diversity was in order given the large number of minority students in Texas classrooms.

The negotiators are Reps. Kent Grusendorf of Arlington, chairman of the Public Education Committee; Dan Branch of Dallas; Dianne Delisi of Temple; Rob Eissler of The Woodlands; and Bill Keffer of Dallas.

The Senate next would name its negotiators to try to work out differences between House and Senate versions of the bill.
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pfikac@express-news.net